Out Of Pocket Health Care Costs In Retirement
Out of pocket health care costs in retirement are often much more than what retirees budget for. Do you have an accurate projection of what you can expect to pay for out of pocket health care costs in retirement? If not, do not be ashamed. Believe it or not, many do not. A recent study revealed that only a mere 8 percent of Americans who had completed their financial planning for their golden years had an accurate estimate of what their potential out of pocket health care costs in retirement may be. Considering the potential detrimental effects associated with neglecting to include out of pocket health care costs into your retirement budget, such a small number of prepared individuals are worrying.
Do You Know Your Estimated Out Of Pocket Health Care Costs In Retirement? You Should
Are you one of the many Americans that is uninformed about the soaring costs of health care expenses in retirement? Did you know that 4 out every 5 seniors planning for retirement do not know what they can expect to pay in out of pocket health care costs in retirement? Do not be one of the many.
The importance of properly including out of pocket health care costs in retirement into your budget cannot be stressed enough. As one of the largest expenses that any retiree will likely face in retirement, and also the one expense that is capable of doing the most damage to your budget, this line item deserves more than just a little respect.
Your Out Of Pocket Health Care Costs In Retirement Will Likely Be More Than You Expect
As if out of pocket health care expenses in retirement were not high enough as it stands now, we have inflation to add to the financial burden that medical expenses in retirement plague us with. That means that the already potentially crippling amount to be deducted from every retiree’s bottom line, can be expected to rise exponentially at a rate of 7 percent through the next decade, according to Fidelity Investments. Yikes.
Question of the day: Do you know this number? Are you aware of what the average American individual and couple in retirement can expect to pay out of pocket for health care expenses? According to the Health Cost Institute, when asked, 80 percent of seniors believed that $50,000 would cover their out of pocket health care costs in retirement. Wouldn’t that be nice?
The actual projection is more like this – the average American couple, retiring today (in 2015) at age 65 and planing on staying in retirement for 20 years, can expect to pay out of pocket for health care costs in retirement $292,800. Take the same couple, only assume that they live until 90, they can expect to pay out of pocket for health care $ 441,200. The same scenario (20 years in retirement), but for an individual: $146,400 and $220,600 if that individual lives to be 90.
If I Am Paying So Much Out Of Pocket For Health Care Costs In Retirement, What Is Medicare Paying?
Many Americans believe that Medicare will cover all if not most, medical expenses in retirement. However, this is simply not the case. Not by far. According to the Employee Benefit Retirement Institute as a retiree today, you can expect that Medicare will cover a mere 51 percent of your health care costs in retirement. That leaves the remaining 49 percent in your lap.
It is important that you take the time to know and understand the plans, supplemental plans and Medigap plans available through Medicare. This will give you a more educated stance when it comes time to make your plan selection, so that you can be more informed as to what you must budget for this expense.
Add Long-Term Care To Your List Of Out Of Pocket Health Care Costs In Retirement
Medicare does not cover long-term care. Also, it does not cover many chronic conditions associated with the need for long-term care, such as cancer or circulation issues. For these types of treatments as a retiree, you can expect to pay close to $300,000 for out of pocket health care expenses.
Costs take a serious spike when long-term nursing care is factored into the equation (which are not covered by Medicare). A retiree spending 15 years, requiring nursing care can expect to dish out $900,000 in out of pocket costs. Assuming this same individual requires 30 years of private nursing care, the out of pocket costs grow to a crippling $1.5 million (that is according to the Health Insurance Association of America).
How Will You Cover Your Out Of Pocket Health Care Costs In Retirement?
The first step in covering your expenses in retirement tomorrow, is to be prepared today. By educating yourself on the costs of health care premiums and additional long-term care, while factoring in such variables such as inflation, Social Security benefits and the likelihood of an incident you can better prepare your budget.
Building a financial plan for retirement on your own is an intricate process that takes much time and effort, not to mention leaving a lot of room for error. With such an important factor as medical expenses, it is important that you accurately predict your costs. Use our FREE online calculator to generate a fast, reliable and accurate estimate of what you can expect to pay in out of pocket health care costs in retirement, so that you can better protect your financial security.